Robo-advice - The future of mortgages?

Robo-advice is a term that has become ubiquitous in conversations about the mortgage market in 2017.

It was prevalent last year after new entrants to the intermediary market offering robo-advice precipitated debates around how far its influence would stretch – and the extent of its threat to the incumbent broker market.

There were a couple of barometers that gave an indication of at least some brokers’ initial attitudes towards the trend, with one being a survey late last year from Legal & General Mortgage Club. The research found that nearly four out of the 10 brokers interviewed (38 percent) saw the rise of robo-advice as the biggest threat to their business in the next three years. That figure was an increase of three percent since brokers were asked the same question near the beginning of 2016. Some 88 percent of the brokers surveyed also told Legal & General in October last year that they would need to invest in technology to remain competitive during the next two years.

At the time the study was published, Jeremy Duncombe, director at Legal & General Mortgage Club and a speaker at October’s Credit Strategy’s inaugural Mortgage Conference in October, said: “Rather than viewing developments like robo-advice as a threat, advisers should look at how new technology can help them to stay one step ahead of the competition.

“Above all else, brokers must ensure that they are using every tool available to provide a modern, holistic service that meets the requirements of their customers throughout all aspects of the market, whether that be for mortgages, remortgages, second charge or buy-to-let products.”

Robo-advice will be one of the topics debated at the Mortgage Conference itself, along with how the intermediary market is adapting to change, how digital tools are being combined with in-person advice; how credit risk assessment is evolving and how such assessments are being affected by macro-economic changes.

Robo-advice has also come to the close attention of the Financial Conduct Authority (FCA). In its 2017/2018 business plan, the regulator said it will continue to provide bespoke regulatory feedback to businesses planning to offer automated advice to the mass market, as this could “make financial advice available to more consumers”. The regulator also plans to publish resources to help firms developing robo-advice services, using the information and insight from its Advice Unit’s work with individual firms to date.

As the regulator’s role to foster innovation and competition becomes increasingly evident, the growth of robo-advice looks set to continue. At the Mortgage Conference, professionals will learn whether that is perceived as a threat or an opportunity.